Yuan takes big fall in 2 months on rate rise
By Zhang Fengming |
October 21, 2010, Thursday
|
Print Edition
Print Edition
THE yuan fell the most in two months yesterday on speculation that China's first interest rate increase in 34 months will ease the pressure for a rise in the currency to fight inflation.
The People's Bank of China, the central bank, set the reference central parity rate of the yuan at 6.6754 against the US dollar yesterday, 0.3 percent weaker than 6.6447 on Tuesday and was the biggest daily drop since August.
The yuan lost 0.11 percent to close at 6.6519 in Shanghai yesterday, according to the China Foreign Exchange Trade System.
The greenback strengthened on China's first interest rate increase since December 2007 but investors became concerned that China's economic growth may slow and turned to the US currency.
The yuan had been on a fast-track growth path last week. It gained nearly 0.5 percent last week and about 2.8 percent since June 19 when the central bank pledged to pursue a more flexible foreign exchange rate and to end a two-year de facto peg to the US dollar.
An appreciating yuan, as urged by Western countries, can help China counter-act against inflation by making imports cheaper.
China's consumer prices for September, which will be released today, are expected to rise to a two-year high. An interest rate increase is viewed by the market as a more powerful a tool to fight inflation.
The People's Bank of China, the central bank, set the reference central parity rate of the yuan at 6.6754 against the US dollar yesterday, 0.3 percent weaker than 6.6447 on Tuesday and was the biggest daily drop since August.
The yuan lost 0.11 percent to close at 6.6519 in Shanghai yesterday, according to the China Foreign Exchange Trade System.
The greenback strengthened on China's first interest rate increase since December 2007 but investors became concerned that China's economic growth may slow and turned to the US currency.
The yuan had been on a fast-track growth path last week. It gained nearly 0.5 percent last week and about 2.8 percent since June 19 when the central bank pledged to pursue a more flexible foreign exchange rate and to end a two-year de facto peg to the US dollar.
An appreciating yuan, as urged by Western countries, can help China counter-act against inflation by making imports cheaper.
China's consumer prices for September, which will be released today, are expected to rise to a two-year high. An interest rate increase is viewed by the market as a more powerful a tool to fight inflation.
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